SFL Corporation is making changes to the chartering and management structure of the jack-up drilling rig West Linus, replacing Seadrill with Odfjell Drilling when it comes to management services for the rig. A similar situation happened a couple of months ago with Odfjell Drilling taking over the management of two Northern Ocean’s rigs.
Along with the West Hercules rig, SFL is the owner of the harsh environment rig West Linus , which is leased back to Seadrill. The 2014-built West Linus rig is currently operated by a subsidiary of Seadrill and employed on a long-term drilling contract with ConocoPhillips Skandinavia in the North Sea until the fourth quarter of 2028.
In February 2021, Seadrill and a number of its subsidiaries, including the current operator of West Linus, filed Chapter 11 cases in the U.S. Bankruptcy Court for the Southern District of Texas. In connection with Seadrill’s expected emergence from Chapter 11 in the near term, the parties have now agreed that the drilling contract with ConocoPhillips Skandinavia will be assigned from the current operator to an SFL subsidiary.
SFL said on Monday it has simultaneously entered into an agreement for the operational management of the rig with a subsidiary of Odfjell Drilling, a harsh environment drilling rig operator. The change of operational management from Seadrill to Odfjell is subject to customary regulatory approvals relating to operations on the Norwegian Continental Shelf.
SFL further stated that, until the approvals are in place, Seadrill will continue the existing charter arrangements for a period of up to approximately nine months. The bareboat charter rate from Seadrill in this transition period will be approximately $55,000 per day.
Upon effective assignment of the drilling contract, SFL will receive charter hire from the rig and pay for operating and management expenses. Under the contract, the rig is earning a market-adjusted rate which is based on market developments for similar jack-up rigs in the North Sea and is adjusted on a semi-annual basis. The current day rate and remaining contract length imply a charter backlog of approximately $500 million.
In a separate statement on Monday, Odfjell Drilling confirmed the agreement with SFL to provide management services for the harsh environment jack-up drilling rig West Linus. The rig operator also said it will take over as manager of the rig as soon as regulatory approvals such as change of duty holder under the Acknowledgement of Compliance (AOC) is approved by Norwegian authorities. Odfjell Drilling expects this to be in place no later than 1 October 2022.
Simen Lieungh , CEO of Odfjell Drilling, said in a comment: “Today we are engaged in platform drilling operations for ConocoPhillips in the Greater Ekofisk Area. The addition of the West Linus management contract will strengthen our long-term co-operation and we look forward to providing safe and efficient operations to ConocoPhillips.”
It is worth reminding that Odfjell Drilling has recently entered into an agreement to replace Seadrill as the manager of two Northern Ocean-owned semi-submersible rigs.